Goldman Sees Downside Risk for Cocoa, Coffee Prices in 2023

By Marvin G. Perez

(Bloomberg) --

Favorable weather supports West African cocoa production while the post-Covid boom in tourism, a component to chocolate sales, is set to slow further as real wages across developed markets fall, analysts at Goldman Sachs Group led by Jeffrey Currie say in report.

With a weaker demand, “high fertilizer prices leave small hold producers priced out of the market, exposing 2023 production to the potential for weather shocks’
Arabica coffee isn’t likely to revisit this year’s highs amid an improved outlook in Brazil’s production and slowing demand
Recent sell-off left prices in oversold territory and there could be a rebound before deflation resumes next year
Price forecast at $1.90, $1.75 and $1.55/lb next 3-12 months
“While ICE inventories remain near multi-year lows, they have become an increasingly distorted signal of tightness
Cotton’s recent price rout, triggered by falling demand, will struggle to go below 75c/bu
US crop was “losing the battle for acreage with corn and soy and facing severe heatwaves last summer”
Fiber to trade between $80-$90/lb
For raw sugar, there’s risk for lower prices at start of 2023 if Brazil lowers fuel tax that would likely spur lower cane-crush going to ethanol as domestic gasoline prices pressure ethanol-blend margins
Sweetener seen in 18c-20c/lb range next year
Demand for soft commodities faces headwinds as inflation shifts household spending away from consumer discretionary purchases toward key energy commodities amid slower growth: Goldman